It is 5 p.m. and the phones are already ringing at Pizzas by Marchelloni in Bolingbrook. The smell of baking dough, tomato sauce and assorted toppings fill the warm kitchen air as pizzas are shoved into one end of a stainless-steel conveyor oven.
When the sizzling pizzas emerge eight minutes later, two teenage boys slide them into thermal plastic sleeves and dash out into the cold January evening to make their deliveries. Another teenager fills bins with pizza fixings, while another sprinkles the toppings onto raw pizza dough covered with vermilion sauce.
With the exception of Karen Siever, a 20-year-old student at the College of DuPage and the shift supervisor, all of the employees are pulling down minimum wage. And all of them recently got a 12 percent pay hike, thanks to Uncle Sam.
After five years of holding steady, the federal minimum wage went up to $4.75 an hour last Oct. 1, when the first of a two-step increase went into effect. It will climb another 40 cents to $5.15 on Sept. 1.
According to Labor Department statistics, the teenagers at Pizzas by Marchelloni are among more than 9.5 million Americans–or 8 percent of those with jobs–whose wages are being raised directly by the new law.
Is the minimum wage high enough? The answer depends on your perspective.
“Too high,” say many employers and conservative economists who complain that the wage is cutting into small-business profits and forcing employers to shy away from hiring unskilled applicants–just as the government is trying to push them off welfare rolls into the labor force.
Even among minimum wage earners, the answer isn’t clear.
A third of those earning the minimum wage are high school students who live at home and most likely use their earnings to buy the three crucial Cs–cars, clothes and CDs. For most of them, the answer is probably “yes.”
But two-thirds of those earning the minimum wage–farm workers, janitors, child-care providers and retail sales clerks–are adults and often the sole breadwinners of their families, according to the Labor Department. For them, the answer is probably “no.”
In macroeconomic terms, meanwhile, the question yields an economist’s classic response of “on one hand . . . but on the other hand.” On one hand, the double-digit wage increase is likely to worsen inflation and stifle job growth. But on the other hand, the boost doesn’t make up the lost buying power of those paid the minimum wage over the 1990s.
The Labor Department points out that even when it rises to $5.15 an hour, the minimum wage, when adjusted for inflation, will not be equal to the April 1991 level when it was increased to $4.25.
But to Arlene and Tony Marquez, the owners of Pizzas by Marchelloni, these big-picture concerns are secondary to the day-to-day survival of their business.
“That additional 90 cents an hour won’t make much difference to kids wanting to get a job,” says Arlene Marquez. “But we feel it–especially when we need to hire extra help. When the minimum wage goes up to $5.15, I don’t know what we will do.”
Across America, there are 12 million small businesses, which employ a disproportionate number of minimum-wage workers. A visit to the kitchen and back office of the Marquezes’ west suburban fast-food store shows how a popular, election-year law boosting the pay of the nation’s lowliest workers ripples through the economy.
The Marquezes employ 18 students, mostly high school kids, at the store at Illinois Highway 53 and Briarcliff Road to make pizzas, deliver them and keep the place clean.
Of the 18 workers, 10 earn $4.75 an hour. Two make $4.95 and two more are paid a “training wage” of $4.50–a reflection of the new law that holds the hourly rate at $4.25 for employees younger than 20 during their first 90 days on the job.
Delivery drivers, who use their own cars, are paid $4.25 an hour plus 50 cents for each pizza they deliver. They also get to keep their tips.
Shift supervisor Siever says paying teenagers $4.75 an hour is fair–especially given the limited skills they bring to the workplace.
“The minimum wage gets kids into the real world, but I think how much they get paid should really be up to the employer,” says Siever, who earns $6 an hour. Hired at $5 an hour more than a year ago because she had prior fast-food restaurant experience, she is one of two supervisors who makes $6 an hour, while a third, Marvin Webb, 23, makes $6.50.
Brad Newman, a senior at Bolingbrook High School who earns about $100 a week delivering pizzas for Marchelloni, is ambivalent about the minimum wage.
“The 50-cent increase doesn’t really seem to make that much difference to me,” he says.
Like most of the other teenage boys working for the Marquezes, the money Newman earns goes to keep his car running.
Dan Lawler, a 15-year-old who started just a few months ago, doesn’t have that problem yet. But he is saving his $4.50 an hour training wage to buy a car when he is old enough to drive.
“I can make more money delivering than I can working in the kitchen,” Lawler says, while restocking the stainless steel bins that hold pizza toppings.
In the five years that the Marquezes have owned the store, they have employed a total of 89, mostly teenage, workers. But with the hike in the minimum wage, it’s possible they will try to get by with fewer than the 18 to 20 people they now employ.
Arlene Marquez says the 50 cents-an-hour increase has already affected her payroll. Not only has she raised hourly pay for her lowest-paid workers, she has also increased the wages she pays to her more experienced workers.
Before the new minimum wage went into effect, her payroll fluctuated between $3,200 and $3,600 a month. Now it bounces between $4,200 and $4,600, depending on how many hours her employees work. While most work 20 to 25 hours, some supervisors work closer to 40 hours.
“I need to keep my labor costs below 25 percent of my weekly receipts,” she says. “If I can keep salaries around 21 percent, I can make a profit.”
At first, the answer seemed to be for Marquez to put in more than the 50 hours she spends each week at the store. But when she works longer hours, that means fewer hours for supervisors like Siever and Webb, who need longer hours to pay for college and groceries.
“I’m trying to achieve a balance,” she says. “I try to work as much as I can without taking hours away from my employees. If you don’t give kids at least 20 hours a week, they start looking for other jobs.”
To help offset the impact of the minimum wage, the couple boosted the price of their pizzas $1 across-the-board. A large 16-inch Primo pizza with five toppings now costs $15.05, up 7 percent from $14.05 before the wage increase.
The higher minimum wage is translating into higher prices at other fast-food restaurants, too, though the impact on prices hasn’t been as dire as some predicted. The reason: Most companies in the $98 billion fast-food industry already pay employees more than what the minimum wage will be in 1997. At Wendy’s International Inc., which has 4,300 U.S. restaurants, the average crew wage is about $5.20 an hour, says a company spokesman. “We aren’t seeing any short-term impact for now,” he adds.
But that’s not the case at small businesses like Marchelloni or even at a competitor like American Restaurant Partners L.P., which operates 62 Pizza Hut restaurant franchises in the Midwest.
American says it has raised its prices by about 3 percent since the minimum wage jumped to $4.75.
The company estimates that its total wage costs will jump by $500,000 during the next nine months–and even more when the full 90 cents-an-hour increase goes into effect in September. It’s part of what employers call the “ripple effect.”
“If you raise the hourly pay of a person who started at $4.25 to $4.75, you have to raise everybody else too,” says Terry Freund, chief financial officer of the chain. “That can be tough for some operations.”
At Pizzas by Marchelloni, the added pay is hefty for a business that averages about $24,000 each month in receipts. About 20 percent of that goes for salaries and a fee the Marquezes pay an outside accounting firm to print payroll checks and take care of federal and state tax deductions.
Another 25 percent is used to buy ingredients such as flour, pepperoni, sauce, cheese and other supplies.
Then there is a 5 percent franchise royalty and a 1 percent advertising fee the Marquezes pay Italian Express Corp. of Joliet, which has about 65 franchises in Illinois, Wisconsin and Indiana. Finally, there is the $1,600 they pay each month to rent their 1,300-square-foot store.
Add to that the cost of utilities, taxes, administration, inventory and insurance, and the $24,000 the Marquezes take in each month is suddenly whittled down to a net of $4,000 and sometimes much less.
“We don’t always make a profit,” says Arlene Marquez. “Sometimes we barely break even.”
The Marquezes are able to survive such thin margins because Tony Marquez is a full-time independent financial consultant at Uni-Financial Corp. in Joliet. He is also president of the Bolingbrook Chamber of Commerce.
“The hike in the minimum wage was inevitable,” says Tony Marquez. “You don’t mind paying more if you have quality people working for you. The problem is that even at $4.25, a lot of these kids aren’t worth it because they aren’t dependable.”
“The biggest personal adjustment I’ve made to the minimum-wage increase is that I have wound up working longer hours,” says Arlene Marquez. “I expect to be working even more when the minimum wage hits $5.15 an hour.”
